The same six problems, every time
Over the past four years, I have reviewed the financials of about 40 dental practices. Solo practitioners doing $800K. Multi-location groups doing $12M. DSO-affiliated and fully independent. Different sizes, different markets, different patient mixes.
The financial mistakes are almost always the same.
Not one of these practices had a clinical problem. Their dentists were good. Their patients were happy. The money leaked because nobody was watching the numbers that actually drive profitability in a dental practice.
Here is what I keep finding.
1. Lab costs above 8%
Lab costs should run 6-8% of collections for a general practice, a range consistent with the benchmarks tracked by the ADA Health Policy Institute. For a practice that does heavy crown and bridge work, 8% is reasonable. For a practice that is mostly hygiene and basic restorative, it should be closer to 5-6%.
I routinely see practices at 10-12%.
The problem is rarely that the lab charges too much per unit. It is that nobody reviews the lab bill in detail. Cases get remade and the practice pays twice. The lab charges for a shade guide or an articulator that was supposed to be included. A case gets sent to the premium lab when the standard lab would produce the same result. Temporary crowns get sent to the lab instead of being done chairside.
One practice I worked with (anonymized Sorso client, general dental, ~$1.7M annual revenue) was spending $14,000 per month on lab costs against $145,000 in collections. That is 9.7%. When we audited the lab invoices line by line, we found $2,800 per month in charges that were either remakes the lab should have covered, duplicate charges, or cases sent to the wrong lab tier.
$2,800 per month is $33,600 per year. That went straight to the bottom line once someone started checking the invoices.
The fix is not complicated. Assign someone to review every lab invoice against the cases submitted. Track lab costs monthly as a percentage of collections. Set a target, and investigate when it is exceeded.
2. PPO write-offs that grow every year
Most dental practices participate in PPO networks. The write-off, the difference between your full fee and the PPO allowed amount, is a known cost of participation. But most owners stop paying attention to how large those write-offs have become.
Here is what I see. A practice joins a PPO network in 2018. The write-off on a crown is $180. By 2026, the full fee has increased but the PPO reimbursement has barely moved. The write-off is now $340 per crown. The practice is producing more, but collecting less per procedure.
At a practice doing $2.5M in production with a 60% PPO patient mix, if the average write-off percentage has crept from 28% to 35% over six years, that is $105,000 per year in additional write-offs compared to where you started. Nobody sent you a bill for $105,000. It just happened gradually.
The question every dental practice owner should answer: what is my total PPO write-off as a percentage of production, and how has that number changed over the past three years?
If it is going up, you have three options. Renegotiate fees with the PPOs where you have enough patient volume to have bargaining power. Drop the PPOs where the math does not work. Or accept the trend and plan for declining margins.
Most practices choose option four, which is to not look at the number. That is the expensive option.
3. Associate compensation that does not tie to production
The most common associate compensation model I see is a percentage of collections. Usually 30-35% for a general dentist. This seems straightforward, but it breaks down in practice for a few reasons.
First, collections lag production. An associate produces $80,000 in a month, but collections on those procedures might not arrive for 30-60 days. If comp is based on collections, the associate's pay does not match their effort on any given month. If comp is based on production, the practice takes the collection risk.
Second, the percentage often does not account for the cost of the operatory. If an associate uses an operatory that costs $15,000 per month in overhead (rent allocation, equipment, assistant, supplies), and the associate produces $40,000 in that room, the practice is paying 30-35% of $40,000 ($12,000-$14,000) in comp plus $15,000 in overhead against $40,000 in revenue. That leaves $11,000-$13,000 before any other practice-level expenses. The margin is thin.
Third, many practices do not track production per associate against the compensation they pay. They just see the aggregate P&L and assume it is working.
The fix is not to change to a salary model. It is to track the economics of each provider seat. What does each associate produce? What does the practice collect on that production? What does the comp cost? What is the overhead of the operatory? What is the profit per associate after all costs?
I have seen practices where one associate was profitable at $180,000 per year in margin, and another was negative after overhead allocation. Same comp percentage, same hours. The difference was production volume and case mix. You cannot fix what you do not measure.
4. Supply costs above 7%
Dental supply costs should run 5-6% of collections for a general practice. Specialty practices may be slightly higher. Above 7% usually means purchasing is not optimized.
The most common problems:
No central purchasing control. Each location or each provider orders what they want, from whichever supplier they prefer. There is no standardized supply list and no volume discounting across locations.
Expired or unused inventory. Supplies get ordered, shelved, and forgotten. Composites expire. Impression materials dry out. Specialty items purchased for one case sit in a drawer for years.
Premium products where standard works. Some clinical situations require premium materials. Many do not. When every provider uses the most expensive composite for every restoration, supply costs climb without a corresponding improvement in clinical outcomes.
A three-location dental group I worked with (anonymized Sorso client, Mid-Atlantic, ~$4.2M collections) was spending 8.2% of collections on supplies. We centralized purchasing, standardized the supply list with input from the clinical team, and negotiated volume pricing with two primary vendors. Supply costs dropped to 5.8% within four months.
On $4.2M in collections, that 2.4-point reduction was $100,800 per year. No change in clinical quality. No provider pushback after the first month. Just better purchasing.
5. Not knowing revenue per chair hour
This is the single most useful metric in dentistry, and most practices do not track it.
Revenue per chair hour tells you how efficiently you are using your most constrained resource. A dental practice has a fixed number of operatories and a fixed number of hours per day. The revenue you generate per hour of chair time determines your production capacity and ultimately your profitability.
For a general practice, $500-$600 per chair hour is a healthy benchmark for provider production (blended across hygiene and restorative, the target is lower). Below $400 usually indicates scheduling inefficiency, high no-show rates, or a case mix that skews too heavily toward low-value procedures.
When I show an owner their revenue per chair hour broken down by day of week, by provider, and by procedure type, the patterns are obvious.
Monday mornings are packed with hygiene. Revenue per chair hour is $250. Wednesday afternoons are heavy with crown preps. Revenue per chair hour is $650. Thursday has a 20% no-show rate. Revenue per chair hour drops to $310.
The insights lead to specific actions. Adjust scheduling templates to balance high-value and low-value procedures across the week. Address no-show patterns with confirmation and prepayment policies. Identify which providers are most efficient with chair time and learn from their scheduling habits.
You cannot optimize scheduling without this number. And you cannot calculate this number without tracking chair time by provider and procedure. Most practice management software can produce this data. Most practices never pull the report.
6. Running one P&L for multiple locations
This one is not unique to dental, but I see it in dental more than almost any other specialty.
A practice has two locations. Both deposit into the same bank account. The accountant produces one P&L for the whole practice. Revenue is combined. Expenses are combined. The bottom line is one number.
The owner thinks both locations are profitable because the combined P&L shows a profit. But when we break it down, location A is generating 65% of the revenue and location B is generating 35%. The overhead at both locations is similar because rent, staff, and equipment costs do not scale down proportionally with revenue.
In one case I reviewed (anonymized Sorso client, two-location general dental, Southeast), a two-location practice was showing $280,000 in annual profit on the combined P&L. When we built location-level financials, location A was generating $380,000 in profit and location B was losing $100,000. The owner had been subsidizing a money-losing location for three years without knowing it.
Location B was not hopeless. It had a newer associate who was still building a patient base, and the scheduling was inefficient. But nobody could see the problem because the numbers were combined.
If you have more than one location, you need a P&L for each. Revenue allocated by where the service was performed. Expenses allocated by where they were incurred. Shared costs (management, marketing, billing) allocated by a reasonable method. This is not optional for a multi-location practice. It is table stakes.
The pattern underneath all of this
The common thread in all six of these mistakes is not incompetence. It is the absence of financial visibility at the operational level.
Your accountant gives you a P&L and a balance sheet. Those tell you whether the practice made money last quarter. They do not tell you why, or where, or how to make more.
A dental practice is a business with very specific financial drivers. Lab costs, supply costs, production per provider, revenue per chair hour, write-off percentages, overhead per operatory. When you track these numbers monthly, the problems become obvious and the fixes are usually straightforward.
When you do not track them, money leaks slowly, and by the time it shows up on the P&L, you have already lost it.
If you own a dental practice and have never seen your financials broken down this way, take the free assessment. We will show you where the money goes and what is fixable.
